The Budget and the bookkeeper: vehicle costs

23 Jan 2018

Vehicles can play an important part in an organisation’s business transactions.

So, in recognition of the fact that, for many organisations, access to a vehicle can make or break a business. In keeping with the government’s stated environmental policy, car and van benefits have been altered. This is to encourage the purchase of environmentally friendly vehicles, and discourage the purchase of vehicles with higher CO2 emissions.

There will also be financial implications for the relevant employee, and this will need to be communicated so that all parties are aware of the potential costs and benefits.

The following are the financial costs relevant to a car.

Benefit charge

To encourage the purchase of cars with low percentage CO2 emissions and electrically propelled cars, the existing 100% first year allowance (FYA) will be extended until 31 March 2021, as will the 100% allowance for gas refuelling equipment. However, the point at which the vehicle is eligible for the allowance has been reduced to 70g/km as at April 2018, and the threshold for capital allowances for business cars will be reduced to 110g/km from April 2018.

From 2018-19 tax year the car benefit charge percentage will be based on the new rates. These are as follows:

The percentage is calculated on the original car cost, which is the total of the list price, accessories, delivery charges and VAT less any capital contribution up to £5,000.

For vehicles with no CO2 data and registered before January 1998 the tax charge is based on the engine size.

And for those vehicles with no CO2 data and registered after January 1998 the tax charge is also based on the engine size as below.

Ultra-low emission vehicles

At Autumn Budget 2017 the government confirmed the lower bands for ultra-low cars and vehicles with zero CO2 emissions. The 0–50g/km band is to be split into six bands:

Zero CO2 emissions will have a percentage of 2 points

1-50g/km will use the percentage according to the numbers of miles the vehicle can travel in pure electric mode.

1 – 130 miles 2%

70 – 129 miles 5%

40 – 69 miles 8%

30 – 39 miles 12%

Few than 30 miles 14%

51-79g/km band percentages are

Diesel supplement

The bands then increase by one percentage point for every 5g/km increase in CO2 up to 37% for emissions of 16g/km or more.

A final note on car benefit charges. Though initially it was previously announced that the diesel supplement was to be withdrawn following new EU emissions testing procedures, because of the slow progress made, and perhaps in recognition of the Volkswagen fraud, the withdrawal was deferred for five years. Instead, a diesel supplement, increased from 3% to 4% from April 2018, is to be added, though no addition can result in the percentage used being greater than 37%.

Fuel benefit multiplier

Again, the government has increased this multiplier from £22,600 in 2017-18 to £23,400 from April 2018. Depending on the number of cars and the emissions this increase may need to be built into the budget.

Vans

To help the push to more environmentally friendly vehicles, the 100% first year allowance for new or unused zero-emission goods vehicles will be extended to 31 March 2018.

Benefit charge

The benefit charge for 2018-19 is £3,350 for unrestricted private use subject to the capital allowance exemption for zero-emission vans.

For zero-emission goods vehicles there is a nil flat rate benefit charge until 5 April 2020. The charge will be increased to 40% of the rate paid by conventionally fuelled vans by 2022-23 and tapered in as follows:

2018-19 40%

2019–20 60%

2020–21 80%

2021–22 90%

20220-23 the rates will be the same.

Fuel benefit charge

The fuel benefit charge increases to £633 from 6 April 2018

Though the Autumn Budget did not have as many changes as those of the previous Chancellor, there are none the less, a lot of small changes that need to be implemented. These will no doubt keep the bookkeeper busy, and, fortunately, in work for a long time to come.

Julie Hodgskin is a fellow member of AAT, runs a licensed accounting practice and is a technical materials author for CIPP.

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